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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The U.S. economy added 146,000 jobs in November, up a bit from 138,000 in October. Unemployment fell to 7.7%, largely because 542,000 additional adults chose not to look for work.

Hurricane Sandy and business fears regarding the so-called fiscal cliff contributed to the slow pace of jobs creation; however, the overall picture is worse than these headline figures reveal and will remain difficult until the policy fundamentals change.

In the weakest recovery since the Great Depression, most of the reduction in unemployment from its 10.0% peak in October 2009 has been accomplished through a significant drop in the percentage of adults working or looking for work. Were adult labor-force participation the same today, the unemployment rate would be 9.7%.

Adding more than eight million part-time workers who can’t find full-time work, the unemployment rate becomes 14.4%. That measure rose above 14% in the wake of the financial crisis and remains stuck there.

Convincing millions of Americans they don’t want a job or compelling desperate workers to settle for part time work has been the Obama administration’s most effective jobs program.

Economic growth remains weak, as most of the pickup to 2.7% in the third quarter was attributable to inventory build and a temporary surge in exports. Consumer spending and business investment weakened, substantially, and goods piled up warehouses–either in the fourth quarter or early next year, inventories will be adjusted and growth will slow. Exports will slow as Europe’s recession continues. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

On Tuesday, the Commerce Department reported the deficit on international trade in goods and services was $42 billion in July, up slightly from $41.9 billion in June.

Imported oil and subsidized imports from China account for nearly the entire $500 billion annual trade gap and pose the most significant barriers to robust growth and job creation.

The trade deficit on oil moderated a bit as economic activity slowed and prices fell from earlier in the year, but the trade gap with China continues to increase and now exceeds $350 billion on an annual basis.

The economic recovery began five months after President Barack Obama took office, and GDP growth has averaged 2.2%. In October 2009, unemployment peaked above 10%, but has fallen to 8.1% entirely because fewer Americans are seeking work.

Ronald Reagan inherited a similarly troubled economy, with unemployment cresting at 10.8% early in his presidency. When he sought re-election, the economy was growing at 6.3%, unemployment was 7.3%, and a rising percentage of Americans were seeking work. Continue reading…

These are the personal views of Thomas Lam, group chief economist at OSK-DMG:

The June U.S. retail sales data were decidedly soft.

While the headline decline of 0.5% from the prior month was partly magnified by the surprise drop in motor vehicle and parts sales, which was contrary to the rise in unit auto sales, the core categories were also broadly weaker.

Our simple one-month diffusion index of core retail sales (ex-auto, gasoline and building materials) fell to 40%, suggesting that more categories were declining than expanding in June. On a three-month moving-average basis, our core sales diffusion index, which tends to lead the growth in core sales by several months, also slipped to 50%, the weakest level since the middle of 2010. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Occupy Wall Street may be out of Zuccotti Park but Americans ignore its message only at their peril.

Dispossessed by police from prominent venues around the country, the forces that inspired mass, albeit unseemly demonstrations have not abated. America is rapidly fracturing into two nations–affluent players in the global economy and a growing mass facing diminished circumstances for themselves and their children.

If forces marginalizing millions are not addressed, America is headed for much worse than tent cities and baths in parks. Economic bifurcation into the super affluent and the poor will erode the institutions and values that bound together immigrants from many heritages, faiths and tongues into a single nation.

The Census Bureau reports about 100 million Americans–one in three–live in or perilously close to poverty. Many are working but rely on food stamps, government agencies and charity to feed, clothe and provide medical care to their children. Most have too few resources to see a dentist regularly or even subscribe to a daily newspaper. They rely on cars, often because decent housing is much too costly near their work, and are forced to live too inconveniently from grocery stores, other services and multiple jobs to practically rely on public transportation. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Analysts expect the Commerce Department to report on Wednesday the deficit on international trade in goods and services was $47.7 billion in March, up from $45.8 billion in February.

This trade deficit subtracts from demand for U.S.-made goods and services, just as a large federal budget deficit adds to it. Consequently, a rising deficit slows economic recovery and jobs creation and limits how much Congress and the President may cut the deficit without sinking the economic recovery.

Rising oil prices and imports from China are driving the trade deficit up, and these are major barriers to creating enough jobs to pull unemployment down to acceptable levels over the next several years.

Jobs Creation

The economy added 244,000 jobs in April; however, 360,000 jobs must be added per month to bring unemployment down to 6% over the next 36 months. With federal and state governments trimming civil servants, private-sector jobs growth must exceed 360,000 per month to accomplish this goal.

Americans have returned to the malls and new car showrooms but too many dollars go abroad to purchase Middle East oil and Chinese consumer goods that do not return to buy U.S. exports. This leaves too many Americans jobless and wages stagnant, and state and municipal governments with chronic budget woes.

Simply, policies regarding energy and trade with China are not creating conditions for the 5% GDP growth that is needed and easily could be achieved to bring unemployment down to acceptable levels.

In April, the private-sector added 268,000 jobs per month, but many were in government-subsidized health care and social services. Netting those out, core private-sector jobs have increased only 229,000 in April. That comes to 73 non-government-subsidized jobs per county for more than 5,000 job seekers per county.

Early in a recovery, temporary jobs appear first, but 22 months into the expansion, permanent, non-government-subsidized jobs creation should be much stronger.

Economic Growth

Since the recovery began in mid 2009, GDP growth has averaged 2.8%, disappointing administration economists who have consistently assumed 4% growth in budget projections and forecasts for the job-creating effects of stimulus spending.

Consumer spending, business technology and auto sales have added strongly to demand and growth, and exports have done quite well. However, soaring oil prices and the continued push of subsidized Chinese manufactures in U.S. markets have offset those positive trends.

Administration imposed regulatory limits on conventional oil and gas development are premised on false assumptions about the immediate potential of electric cars and alternative energy sources, such as solar panels and windmills. In combination, administration energy policies are pushing up the cost of driving and making the United States even more dependent on imported oil and indebted to China and other overseas creditors to pay for it.

To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan by 40%. It accomplishes this by printing yuan and selling those for dollars and other currencies in foreign-exchange markets.

Presidents Bush and Obama have sought to alter Chinese policies through negotiations, but Beijing offers only token gestures and cultivates political support among U.S. multinationals producing in China and large banks seeking additional business in China.

The United States should impose a tax on dollar-yuan conversions in an amount equal to China’s currency market intervention divided by its exports–about 35%. That would neutralize China’s currency subsidies that steal U.S. factories and jobs. It is not protectionism; rather, in the face of virulent Chinese currency manipulation and mercantilism, it’s self defense.

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Economists expect the Labor Department will report the economy added 185,000 jobs in April, after adding 192,000 in February and 216,000 in March. While stronger than in prior months, jobs growth remains too weak, and the economy is in danger of slipping into a second recession. Longer term, the nation faces fundamental structural problems that neither political party seems willing to address in a comprehensive and systemic fashion.

In the first quarter, bad weather slowed construction activity, rising gas and health-care prices tapped off consumer dollars and weakened demand in other sectors, and defense and state and local government spending slowed. GDP growth was a paltry 1.8%–much less than economists forecasted in January and well below the minimum sustainable rate.

Growth less than 2% to 2.5% is not sustainable, because many businesses can meet such modest growth in demand by improving productivity and laying off workers to maintain margins in the face of rising energy and other commodity prices. Layoffs slice household income, and a negative cycle of reduced spending begins.

Indeed, the four-week moving average for new unemployment claims moved up to 408,000 for the week of April 23 from 390,000 the week of April 2. A rate below 350,000 is consistent with a strong economy and above 400,000 is perilously close to recession levels.

Without stronger growth in the second quarter, the economy will cycle down into recession–it can’t likely continue to drag along at about 2%.

Continue reading…

These are the views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:

With the policy decision on interest rates universally expected to have remained unchanged at the April 26-27 meeting, the focus, as always, was on the accompanying Federal Open Market Committee (FOMC) statement. The evolution of the statement, however, contains minimal surprises. Instead, the key highlight was Chairman Ben Bernanke’s post-meeting press briefing debut (going forward, the briefings will be held four times a year, coinciding with the release of the economic projections from participants–FOMC members and other FRB Presidents–normally in January, April, June and November).

In the April statement, the FOMC toned down their description of the ongoing economic recovery to “proceeding at a moderate pace” from “firmer footing” in March, but gained more conviction in the “gradually improving” labor market conditions. This implies that the Committee does not view the 1Q 2011 soft patch in the economy as a likely turning point.

In addition, while the FOMC further acknowledges the pass-through from higher commodity prices to inflation, the Committee maintains that the spillover is likely to be “transitory” and that it is crucial to be vigilant of the changing dynamics of longer-term inflation expectations and underlying inflation.

Finally, the FOMC also confirmed, as we expected, its intention to “complete” the $600 billion Treasury purchase program by June and maintain the existing reinvestment policy for now.

Continue reading…

 These are the views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:

Using the latest source data, our calculations suggest that real GDP growth could be tracking about 2% or less in 1Q 2011 from roughly 3% on average during the prior six quarters.

Essentially, the greater subtraction from net exports, the contraction in structures and residential investment, and the likely drag from government seems to have overshadowed the lower positive contribution from inventory change and softer growth in capex and consumer spending in 1Q 2011.

Still, the apparently sharp deceleration in economic growth is puzzling in part because it is not entirely reflected in other macro indicators or high-frequency data.

To be sure, the guidance from the monthly ISM and weekly jobless claims data appears consistent with real GDP growth in the vicinity of 3% or better.

Also, the forward-looking details from the latest final sales (GDP excluding inventory change) data do not imply a sustained loss of momentum in economic activity.

Generally, the interest-sensitive components of final demand tend to lead the less interest-sensitive categories. The average lead time is about four quarters or longer (using data since 1985). Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The economic consequences of a U.S. government shutdown can’t be calibrated on a spreadsheet with an economic model. It all depends on who wins public opinion–Congressional Republicans or the president and Democrats.

Federal spending is out of control. From 2007, the last full year before the financial crisis, to 2011, the second full year of economic recovery, spending has jumped $1.1 trillion, 40%, when a $200 billion increase would have satisfied inflation.

For any other country, a deficit exceeding 10% of gross domestic product would force austerity by sending interest rates on government bonds through the roof. Alas, the U.S. prints the world’s currency–the dollar–so it can inflate its way to solvency, and the bond market is starting to take that bet.

Enter the Tea party, that troublesome bunch of youngsters pushing elder Republicans to stand up for fiscal solvency, end the madness or halt funding for the government.

Closing federal offices for a few days will have not a great, lasting impact. On reopening the checks will go out. What counts, though, is whether the newly elected conservative majority in the House of Representatives keeps its mandate as measured by the polls.

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(These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission.)

Federal finances are in shambles, and Americans should be amused if not disgusted by the explanations and solutions both political parties offer.

President Obama’s budget plan issued in February projects a $1.6 trillion deficit for 2011 and a cumulative shortfall of $11 trillion through 2021.

Things may get worse, as additional revenue and cost savings from health care reforms don’t materialize and the 4% growth assumed by the president’s budget for the next four years proves Pollyanna.

Time and again, Obama and House Democratic leader Nancy Pelosi have demagogued the problem, blaming two wars and tax cuts instigated by President Bush and the Great Recession.

Continue reading…